3/28/2025

Phillips 66 Director Pease Criticizes Onetime Backer Elliott

Bloomberg (03/28/25) Tse, Crystal

A board member of oil refiner Phillips 66 (PSX) appointed with the blessing of Elliott Investment Management is speaking out against the activist investor, which is running a campaign that could oust him a year after his appointment. “In my view, it was Elliott’s inconsistent engagement that has proven most peculiar,” Bob Pease, who joined the company’s board in 2024, wrote in a letter to shareholders Friday seen by Bloomberg News. “What I saw from the board was a clear commitment to getting to the right answer but a real struggle to understand and engage with an apparently highly distracted shareholder in Elliott.” Pease’s turn comes as the proxy battle between Phillips 66 and Elliott intensifies, with both sides recently naming their board nominees for an election expected to be held in May. Phillips 66 listed four candidates including Pease, while Elliott nominated a slate that would replace him, according to a proxy filing. “I do not know why Elliott now wants me off the board,” Pease said. A representative for Elliott didn’t immediately provide comment. He also said that Elliott has refused to let Phillips 66 meet with its nominees. The company was “met with a declaration that there were ‘no next steps’ and then continued public assaults,” Pease wrote. Elliott met with members of the Phillips 66 senior management team on March 3 without the presence of any independent directors, according to a proxy filing. Elliott — one of Wall Street’s busiest and most respected activist investors — had worked with Phillips 66 to appoint him to the board in 2024, after first revealing a holding in the company the year before that’s now become a $2.5 billion stake. Pease would bring “extensive experience in refining and the energy industry more broadly,” Elliott Partner John Pike and Senior Portfolio Manager Mike Tomkins said in a statement announcing his appointment last year. Elliott had nominated seven candidates to the board, which has four slots under its staggered board structure. It later named Brian Coffman, Sigmund Cornelius, Michael Heim and Stacy Nieuwoudt as nominees while identifying the remaining as alternate candidates, a proxy statement showed. Pease defended Phillips 66’s portfolio of assets, saying that it had delivered synergies and less-volatile cash flows. Elliott has called for the refiner to review its conglomerate structure and monetize its midstream business. The investment firm criticized Phillips 66 in a letter this week, saying management is more concerned about maintaining their compensation than increasing the stock price. Pease held various roles at Shell Trading and Motiva Enterprises and was most recently president of the US downstream business for Cenovus Energy before joining the Phillips 66 board.

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3/28/2025

Italian Fund Managers Add to Uncertainty in Generali Board Tussle

Reuters (03/28/25) Semeraro, Gianluca; Za, Valentina

A group of Italian fund managers said on Friday it would put forward four candidates for the new board of Generali (GASI), adding to uncertainty over the outcome of a key shareholder vote at the country's biggest insurer. A shareholder clash at Generali is unfolding amid a wave of consolidation reshaping Italian finance. Generali's investors will vote in a new board on April 24, with top shareholder Mediobanca (MDBI) expected to propose another term for CEO Philippe Donnet as part of a slate of board nominees. Donnet has previously been opposed by the insurer's second- and third-largest shareholders. The move by the fund manager group, which owns around 0.7% of Generali, increases the chance of a fractured board. After a prolonged internal debate on whether to keep out of the fray, which would likely have helped Mediobanca's slate of nominees, the investors opted to propose their own candidates. The decision was steered by fund management representatives of Intesa Sanpaolo (ISP), people with knowledge of the matter said, as Italy's biggest bank pushed for Generali's wider investor base to have a say, next to its biggest shareholders. Three years ago, Donnet weathered a leadership challenge from Generali's second- and third-largest investors: Italian tycoons Leonardo Del Vecchio and Francesco Gaetano Caltagirone. In 2022, Generali's institutional investors voted en masse for Donnet, who was then the CEO candidate proposed by the board, with support from Mediobanca. This year, Generali's board has not proposed any candidates, after Italy changed corporate governance rules that Caltagirone had criticized, leaving to Mediobanca the task of putting forward Donnet. To avoid picking sides in the shareholder battle, institutional investors at the AGM could favor the Italian fund managers' proposal. While Caltagirone is not planning to challenge Donnet directly, next month's vote could produce an unwieldy board. With his 6.9% stake, Caltagirone is expected to propose up to six nominees for Generali's 13-member board. If his slate wins, the split of board seats could create a deadlock. Under Generali's bylaws, up to nine directors are selected from the list receiving the most votes. The remaining four are chosen proportionally from the other two slates, provided they cross a 5% threshold. Adding to the uncertainty, UniCredit (CRDI) has recently bought 4.18% of Generali and the bank has not disclosed its voting strategy. Intesa is keeping out of Italy's M&A frenzy, but bankers say Generali is such a key asset in the consolidation process that neither Intesa nor UniCredit can afford to disregard the insurer's fate.

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3/28/2025

KKR and State-backed JIC Join Forces to Take Japan's Topcon Private for $2.31 Billion

Reuters (03/28/25) Bridge, Anton; Yamazaki, Makiko

U.S.-based private equity firm KKR (KKR) and Japanese state-backed fund Japan Investment Corp (JIC) will acquire medical gear maker Topcon (7732) in a tender offer buyout worth 348 billion yen ($2.3 billion), KKR said on Friday. Private equity deals in Japan have been booming as corporate governance reforms and increasingly vocal activist shareholders push more companies to go private. KKR will invest around 256 billion yen to take a majority stake and JIC's private equity arm will invest around 95 billion yen for a minority interest. Topcon president and chief executive Takashi Eto will sell his shares in the tender offer and then reinvest in the buyout. Currently he holds 0.07% of Topcon's shares, filings showed. It is the first time that JIC, which is overseen by Japan's trade ministry, has teamed up with a global private equity firm, a JIC spokesperson said. The transaction is the latest in a wave of take-private deals among Japanese firms that follow in the wake of activist investor pressure. Topcon's two largest investors are both activists - ValueAct Capital and Oasis Management — holding stakes of 13.69% and 10.58%, respectively, based on LSEG data. "We want to pursue our long-term strategies for eye-care products and positioning businesses by going private as it's difficult to do so when shareholders, including activist investors, are asking us to achieve profits and higher share prices in the relatively short term," Topcon's managing executive officer, Yoshikuni Ito said. The tender offer price of 3,300 yen per share marks a 5.4% premium on Topcon's closing price of 3,130 yen on Friday and a 99.5% premium over the simple average closing price of Topcon's stock for the 12 months up to December 9, 2024, KKR said. A future relisting is in the offing but not for at least four years, in order to allow management time to execute its strategy, Ito said. Other privatizations following activist involvement include chemicals company JSR and software developer Fuji Soft (9749), which was acquired in January by KKR after a protracted bidding war with rival private equity group Bain Capital. "KKR and JIC are great partners to help Topcon strengthen its competitiveness and achieve its potential," Rob Hale, co-CEO of ValueAct Capital, said in a statement.

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3/28/2025

Sumitomo Realty to Pump $17 Billion into Tokyo, Mumbai Properties

Nikkei Asia (03/28/25) Toyama, Naoyuki

Japan's Sumitomo Realty & Development (SURDF) will invest 2.5 trillion yen ($16.6 billion) in projects in Tokyo and India, with the aim of boosting pretax profit by half to over 400 billion yen in a decade, the company announced on Friday. Sumitomo Realty will spend 500 billion yen on a mixed-use development in Mumbai, and 2 trillion yen on large-scale redevelopment projects in the Roppongi and Yaesu districts of Tokyo over 10 years through March 2035. Though rising construction costs in Japan are pushing many developers to tap the brakes on redevelopment plans, Sumitomo Realty sees a decline in new office space leading to a tighter supply and more business opportunities. In its business plan through the year ending March 2028, the company aims to achieve a three-year cumulative pretax profit of 900 billion yen and net profit of 650 billion yen. It will also proceed with the sale of cross-shareholdings. The developer expects to raise dividends 10 yen a share per year during the three years. Investments and dividends will be covered by operating cash flow. The announcement comes after U.S. hedge fund Elliott Investment Management acquired shares in Sumitomo Realty. Sumitomo Realty Managing Executive Officer Tokiyuki Okada argued that shareholders benefit from the company's business model of holding on to the properties it develops rather than selling them. "If the company continues to invest, it will be a win-win situation in that we can share bigger fruits with shareholders," said Okada. Also on Friday, Sumitomo Realty raised its net profit guidance for the year ending Monday by 1 billion yen from its earlier forecast to 191 billion yen, up 8% on the year. Sales are now expected to increase 4% to 1.01 trillion yen, an upgrade of 10 billion yen. The company cited rising office rents, hotel room rates, and condominium sales prices for the upgrades.

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3/27/2025

Korea Zinc Secures Court Win Against Top Investor Before AGM

Bloomberg (03/27/25) Lee, Heesu

A South Korean court has ruled in favor of Korea Zinc Co.’s (010130) efforts to stop its largest investor from voting at a keenly awaited annual shareholder meeting, a boost for Chief Executive Yun B. Choi’s effort to retain control over the metals giant. The Seoul Central District Court said in a statement on Thursday that it had rejected an injunction from Young Poong Corp. (000670), a decision that hampers efforts by the group and private equity backer MBK Partners Ltd. to topple Korea Zinc’s board at the Friday’s investor gathering, and raises the heat in a months-long corporate battle. With Young Poong blocked from using its 25.4% stake, the allies will be left with only MBKP’s 15.83% voting share. That means Choi and his allies, holding about 35%, will be in a position to counter any challengers and strengthen their grip on the board. The world’s biggest producer of refined zinc has been caught in a messy shareholder battle since Young Poong and MBKP launched a takeover bid for the company six months ago, setting off a scramble for control. A make-or-break shareholder meeting earlier this year ended in disarray after Choi used one of Korea Zinc’s units to buy shares in Young Poong, thereby creating a cross-shareholding structure and barring the investor from voting its stock. Initially, the court ruled in Young Poong’s favor, prompting Choi to make a second attempt to block the company from voting using a similar tactic. This time, however, the court accepted Choi’s move. The setback for Young Poong and MBKP is also a blow for shareholder activism in Asia’s fourth-biggest economy, long penalized by international investors for its shaky corporate governance and opaque structures. Young Poong shares closed down 9.1% in Seoul after the news, while Korea Zinc settled 1.2% lower. Korea Zinc, Young Poong and MBKP were not immediately available for comment. MBKP and Young Poong teamed up in September to make an unsolicited offer, which was rapidly rejected. They accused Choi of ignoring shareholders’ rights and loading the company with debt, accusations Korea Zinc has repeatedly dismissed. Korea Zinc’s management rushed to push back, first with a share buyback and then with a last-minute share issue, later scrapped under regulatory pressure and described by Choi as a “tactical error.” At the Friday’s meeting, Korea Zinc has proposed capping the board at 19 members. If shareholders reject the cap, they will vote on adding either 12 or 17 directors. Korea Zinc nominated up to seven candidates, while Young Poong and MBK put forward 17 nominees. Proxy advisory firms, including the Institutional Shareholder Services Inc. and Police Investigations and Review Commissioner, have supported the 19-member cap but offered mixed views on director candidates. Glass Lewis, which previously backed all Korea Zinc-nominated candidates, criticized the recent developments as a “blatant entrenchment tactic that seemingly prioritizes management control over the fair exercise of shareholder rights.” PIRC opposed all 17 candidates from the Young Poong-MBK alliance, while supporting all nominees and agenda items from Korea Zinc. The battle has drawn headlines and attention well beyond Korea’s boardrooms. Including affiliates, the company accounts for 12% of the world’s zinc production outside China, a key metal for applications such as electric vehicle batteries. It is also a major supplier of lead and silver, playing a crucial role in global efforts to reduce reliance on China for critical minerals.

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3/27/2025

KKR Nears Deal to Buy Japanese Medical Gear Maker Topcon, Sources Say

Reuters (03/27/25) Yamazaki, Makiko; Sen, Anirban; Wu, Kane

KKR (KKR) is nearing a deal to acquire Japanese medical gear maker Topcon (7732), according to people familiar with the matter, marking the latest sign of increased leveraged buyout activity in Japan. If the talks are successful, a deal could be signed in the coming days, the sources said, requesting anonymity as the discussions are confidential. The price being discussed has not been disclosed yet. Topcon has a market value of about 323.4 billion yen ($2.15 billion), and opened at 2,944.5 yen per share, down 0.9% from Wednesday's closing price. Shares of Topcon surged as much as 8.55% from Wednesday's close, reaching 3,224 yen apiece following the publication of Reuters' report earlier in the day. The potential deal comes as Japan's corporate governance reforms, rising shareholder activism, and a weak yen have created a favorable environment for dealmaking, particularly for private equity firms. A growing number of Japanese firms under pressure from activist funds have recently chosen to go private, including chemicals company JSR and software firm Fuji Soft (9749). Topcon has been exploring a sale with the help of its advisers, and several private equity firms have been bidding to take the company private. Founded in 1932, Tokyo-based Topcon also manufactures and sells eyecare, smart infrastructure and positioning products. Industrial conglomerate Toshiba previously owned 30% of Topcon, but sold its entire stake in 2015. ValueAct Capital and Oasis Management Company are the largest shareholders of Topcon, holding stakes of 13.69% and 10.58%, respectively, according to data compiled by LSEG. In its most recent quarterly earnings, Topcon projected a group operating profit of 7 billion yen ($46.51 million) and sales of 211 billion yen for the year ending March 31.

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